“Pandemic”…  When we hear that word, our minds reference historic outbreaks such as smallpox, the bubonic plague, and various strains of influenza.  Epidemics have shaped history and impacted companies, even in modern times.  The current Coronavirus – also known as COVID-19 – has society shutting down businesses, shelter-in-place orders, it has us talking about washing hands, social distancing, and flattening the curve.  This terminology focuses on the pandemic instead of supporting businesses, from landlords to non-profits, which means that companies may not be able to operate and/or are forced to significantly reduce operations, disrupt supply chain, and limit business travel. Record number of trade shows and conferences are cancelled, and employee terminations are in question under current and upcoming conditions.

States and many counties preventing landlords form evicting tenants during this pandemic may result in loss of rents, schools have extended spring breaks and are possibly not going to open until the Fall, restaurants are resorting to pick-up orders, hotel chains have record numbers of vacancies, and gatherings over a certain number have halted.  Manufacturers’ supply chains have been disrupted and Non-Profits have been hit hard since thousands of them work directly in person and require close contact.  Apartment Owners now face risk of losing rents and possibly liability lawsuits from this.  This situation has and will more than likely lead to an additional loss of business income and leave company owners wondering about their insurance coverage and if there is coverage during this Pandemic.  It is imperative to understand all of this and what are best next steps for every business owner.

Bottom line… Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators.  Business interruption does not, and was not designed to provide coverage against communicable diseases such as COVID-19.  Of course, ever policy differs in its nuances, but generally infectious diseases and pandemics are excluded from most if not all standard insurance policies.  This being said, there is a lot of active talk right now between congress, insurance regulators and the insurance companies about what can be done to help during these unprecedented times.  This is one of the main reasons it has never been more important to have an insurance broker who understands your coverage’s, is staying informed with the hour to hour changes from the government, and most importantly is willing and committed to fight for you, your families and your businesses.  This is what we are doing here at GSI!

So, let’s get into this a little deeper… What polices are most likely to be affected by Covid-19 and how will they respond?

Business Interruption

Business interruption covers loss of income due to a loss such as a fire on the premises or for contingent business income, a supplier or a hurricane.  With a global outbreak such as Coronavirus, your employees may be required to work remotely or not work at all due to quarantine or other restrictions.  Business Interruption is a common coverage on a business owners policy or commercial property policy.

Why isn’t business income coverage covering your business during this pandemic?  Most standard policies have been designed and priced to require some type of direct physical loss or damage to either your premises or some part of your supply chain for this coverage to be triggered.  Without this trigger, most if not all insurers stance at the time of the claim will likely be that a virus/infectious disease in your facility did not create a physical loss or damage.   On top of this, viruses and diseases are typically specifically excluded on all standard business owners’ policies.

Does standard commercial insurance cover disease outbreaks?  Unfortunately, the likely answer is no, but that doesn’t mean companies are at a complete loss.  Referencing your specific policy is vital, but there are a few situations where you may already have coverage which is why it’s important to understand your policy and speak with your agent.

There is potential coverage through communicable disease through communicable disease coverage under specific carrier forms if the insured is required to close their operation by a “public health authority” order for closure, decontamination, etc.  Unfortunately, this coverage is limited and often is offered at a sub-limit which is much lower than your primary limits.  It’s important to consult your insurance agent to find out what your policy wording includes and if there is any coverage available.  It’s also extremely important that your broker is providing guidance around your coverage and can answer specific questions around this and how to best maximize all claims situations.

Extending civil authority coverage… historically, such as during the Ebola crisis, there have been special endorsements added to policies specifically excluding infectious diseases like COVID-19.  In 2014, the ISO offered business interruption coverage under its Ebola-related commercial property endorsements, so it is possible to obtain extending civil authority coverage but unlikely available for today’s outbreak.

Additionally, this type of insurance can cover circumstances where the government deems your business or its surrounding area unsafe. Since then, most carriers have added a specific exclusion for infectious diseases, which is one of the reasons most business owners’ policies exclude contagious diseases.

Commercial General Liability Insurance

Apartment Owners, Property Managers, Restaurants and many other businesses may face the risk of failing to protect others from exposure from infection on their premises.  The hospitality industry is particularly vulnerable.  Many standard general liability policies for businesses contain bodily injury clauses that include diseases, but those are in place to protect your business in case of the accidental spreading of pathogens or if someone gets injured on your premises.  These policies typically include limitations about pollution, but – again – the definition “pollutant” is vague and would need to be determined by a court.  The good news here is that insurance companies have a duty to defend and should meet that obligation even if there is just a possibility of coverage on the underlying policy.  There may be an uptick in these types of claims in months to come with so many getting sick so don’t wait to make sure you are properly covered.  Having the right agent has never been more important to stay ahead of this and make sure you have the best outcome in case of a claim like this does occur.  Errors and Omissions coverage may also be triggered for real estate owners and/or property managers as their tenants face financial losses resulting from mismanagement of their response to this pandemic.  So be proactive and consult with an expert if you’re not sure what to do.

The definition of “pollutant” can be unclear, so it’s best to consider outbreaks excluded from insurance policies in this situation.  Some would argue that an environment is unsafe for work due to a contagion, in essence, “damaging” the property by deeming it dangerous.  Policy language differs from carrier to carrier on how it will respond to infectious diseases.  This is one of the reasons why a pollution policy should be recommended for some business owners because they are much broader in language and can extend coverage where a typical commercial general liability policy will not, since it’s not designed to offer pollution coverage.  Do you have information overload yet?  Another reason what why having a consultant that is specialized in your industry is essential.

Supply Chain Disruption Insurance

Hundreds of thousands of businesses today rely on overseas suppliers for their operations.  Food manufacturers, auto parts manufacturers, clothing manufacturers are just a few that are feeling the pain right now with their supply chains being slowed down and/or completely halted.  This is resulting in less revenue, layoffs and possible closure of facilities.  Manufacturers and Distributors can take additional steps to limit the impact of supply chain disruption such as warehousing inventory and using multiple suppliers where possible.  Supply Chain Disruption Insurance exists to cover interruptions of raw materials, parts and supplies.  These policies are typically triggered as a result from physical damage on the premises of the named or unnamed supplier.  It’s also important to note that this coverage typically only covers losses stemming from disruptions from specific suppliers scheduled on your policy.  In addition to this, these policies typically require that your supplier also suffer the type of property damage that would be covered in the insureds first-party policy.  Unfortunately, bacteria and virus exclusions will also likely be listed on these policies.

Worker’s Compensation

The outbreak has already resulted in workers compensation claims being reported.  We are expecting this number to rise in the coming days and months.  Each claim is different and will depend on the individual circumstances and where the infection occurred.  In the case of employees, if a worker can directly prove that they were put into harm’s way by an employer and therefore contracted a disease, they may to be covered under workers’ compensation policies but it will vary from state to state.  Some state laws limit how a policy can apply coverage to employees outside of the US and for employees that have excessive? travel.  Some states like Washington are ensuring that not only for those on the front line like healthcare workers are the ones that will be covered.  Time will tell how other states will respond but ultimately workers compensation insurance covers your employees who suffer injury or illness that has been contracted in the workplace or on the job.  This also extends injuries arising out of or in the course of employment.

Employment Practices Liability

We haven’t seen many claims come up on this yet, but we expect that there will likely be a rise in employment related claims due to workers compensation coverage not being sufficient and/or terminations from this pandemic.  With governors in some states encouraging employers to check the temperatures of their employees and telling them to ask their employees if they have the coronavirus leads to some potential questions around employment laws.  Though this may be encouraged by some state regulators it’s very possible we see additional claims including this in terminated employees’ complaints.  Here is a helpful resource for employers to protect their workers from COVID-19.

Here are some additional links that are helpful for business owners regarding the coronavirus (COVID-19):

EDD – California – Coronavirus

IRS – Coronavirus Tax Relief

US Small Business Administration – Disaster Assistance

California – Business Coronavirus Relief

CDC – Coronavirus Disease – Protect yourself

US Government Response to Coronavirus

Event Insurance 

Record number of trade shows and conferences are being cancelled daily.  The Olympics this year may also be cancelled due to this outbreak which would add to the billions of dollars in losses which include the interruption of important business deals and connections being made.  Some businesses may have a specialized event cancellation policy in force.  This coverage differs from policy to policy for sports events, entertainment, real estate trade shows or conferences and which carrier/policy form is used.  These polices may be written to specifically include coverage against cancellation for infectious diseases but what we are seeing is that most insurance companies have inserted endorsements excluding the coronavirus into this coverage.  If you have an event policy in place, be sure to check your policy to be sure there are no exclusions for pandemics and/or naming the coronavirus specifically.

Rent Protect Policies for Apartment Owners and Landlords

With most states now preventing landlords from evicting tenants, this is likely to lead to loss of rents from tenants not being able to pay their normal monthly rents.  Is this covered?  It’s unlikely this is covered under your standard business owner’s policy or apartment policy.  The good news is there are policies out there that do afford coverage for loss of rents, and the way the policy form reads, is silent as it relates to pandemics.  This is likely to change in the days to come but it’s still very possible, these policies will still be available.  If you ask your agent if he has heard of this coverage, more than likely he will say this coverage is not available or has not heard of it.  If this is the case, please call our team and we can help you, as we specialize in landlords and apartment owners and will advise all policies that will be best suited for your exposures and insurance needs.

What should businesses do in times of a disease outbreak?

1. Take action!  Employers can start considering next steps to protect their employees.  Comply with OSHA’s rules and regulations.
2. Develop new policies around sick leave and paid time off which should include:
   1. Sick Pay and Sick Days
   2. Employees Health Plans
   3. Build Confidence when communicating your policies so employees are not afraid
3. Create a Business Continuity Plan
   1. Include? Supply Chain
   2. Disrupted Operations
   3. Identify Functions that can be replaced or transferred
   4. Appointing key staff
4. Keep the workplace safe
   1. Follow the CDC guidelines
   2. Reduce risk of transmission
   3. Communicate to your staff, your tenants and/or clients the proactive steps you are taking that are within your control
      1. Link for recommendations on cleaning and disinfection
5. Use Technology and over communicate
   1. Companies like Zoom, RingCentral and Whereby offer alternative technology solutions to make continuing business easy
   2. Create and develop a remote policy where you can
6. Talk to an insurance agent that is well informed and is being proactive during this unprecedented time of COVID-19 to avoid any surprises while passively renewing your insurance policies.

A final piece of advice would be to play it smart. For the safety of your employees and the continuity of your business, being informed and proactive is the best way to go.

If you have additional questions about commercial insurance coverage and COVID-19, contact us at GS Insurance Solutions, Inc.  650-282-3104 or email us at hello@gsisol.com

Marijuana has become a weed in the employer’s garden that just won’t go away. Join us as we explore the legal, technical, and medical aspects of a marijuana drug testing program.

You’ll learn:
• Where marijuana is decriminalized, legalized for recreational use, and authorized for medical purposes.
• How the technical aspects of marijuana drug testing impact employment.
• How other government regulations and scientific reports impact state laws and employment.
Upcoming available date(s):
Wednesday, September 25 at 9:30 AM PDT

Click Here to Register

 

Will your insurance cover the earthquake and flood damage that is predicted to happen?

 

On July 4, 2019, a 6.4 magnitude earthquake hit just north of Los Angeles, California. The next day, a 7.1 magnitude earthquake hit the area. Now, scientists are predicting a massive California storm that could cause a building toppling earthquake and the collapse of the Whittier Narrows Dam. If this prediction comes to fruition, 1.5 million people would need to evacuate and their homes would be under 20 feet of water.

Two major California earthquakes serve as wake up call

The recent California earthquakes damaged highways, ruptured gas lines, and caused house fires. Fifty houses were damaged that week. The back to back quakes as well as the threat of the “next big one” is forcing California residents to take a look at how to protect themselves.

The state of California is spending $16 million to install thousands of earthquake detection devices. While the detection will provide advanced warning of earthquakes to residents, giving them more time to evacuate, it does not protect the homes left behind.

How can California residents protect their homes from earthquakes and floods?

 

According to FEMA, California has the highest risk for earthquakes in the United States. How can residents keep their homes and families safe during an earthquake and/or flood?

1. Make a family plan

Before anything else, make a plan to keep the family safe during an emergency. Compile emergency food, flashlights (wind-up), bottled water, dust masks, goggles, emergency radio, and a first aid kit that is ready to go during an evacuation.

Next, put together an evacuation plan. Keep a sketch of a floor plan. Walk-through each room and determine two points of escape for each room. Choose a meeting location where family members should meet in case of an emergency. Make sure all members of the family understand the evacuation plan and where the emergency preparedness kit is located.

2. Keep the home safe

 

When you live in California, you need a home safety plan ready to minimize damage if an earthquake or flood occurs.

When homeowners are building out their home safety plan, they should create a checklist for earthquakes, floods, and other emergencies.

In the checklist, include:

• Fire extinguishers in all necessary location.
• Near the gas meter, keep a wrench and turn off gas before evacuating the property.
• Keep heavy and breakable items on lower shelves in cabinets with a latch.
• Keep wall decor away from beds or seating areas. Wall decor must be secured to the wall well, so it is less likely to fall.
• Strap appliances (refrigerator, furnace, water heater, etc) to the wall.
• Repair any issues with electricity or gas to ease the likelihood of a fire erupting.
• Install flexible piping for gas and water to avoid leaks.
• Repair structural defects like foundation cracks.
• Anchor all furniture to the wall.
• Add latches to cabinets.
• Ensure the structural integrity of the fireplace chimney.
• Trim trees with hazardous branches.

 

Be sure to prepare long before the emergency happens. As soon as you purchase your home, begin preparing your home for a disaster.

3.  Obtain adequate insurance

General homeowner’s insurance and commercial policies for rental properties excludes earthquake and flood coverage.  Both Earthquake and Flood policies need to be purchased as separate policies. Homeowner’s insurance policies and Commercial Policies for your rental properties will cover for fires as a result of an earthquake, but will not cover for damage to your home from an earthquake. These types of insurance are an add-on, but a necessary add-on in California and other states like Arkansas, Idaho, Illinois, Kentucky, Missouri, Montana, Nevada, Oregon, South Carolina, Tennessee, Utah, Washington, and Wyoming.

Earthquake insurance in California

 

The California Earthquake Authority (CEA) provides most earthquake insurance policies bought through your homeowner’s insurance company.

Interesting Facts:

• Earthquake insurance has the same limit as your homeowner’s insurance policy.
• The deductible does not need to be paid upfront. It can be deducted from the claim amount. For example, if you claim $1,000,000 in damage and have a 25% deductible, you will get a claim check of $750,000.
• Earthquake insurance does not cover landscaping or other exteriors like outbuildings and pools.
• Not every earthquake policy includes coverage for loss of income to your rental property should the property be uninhabitable due to an earthquake loss

 

Flood insurance in California

 

In the United States, flooding is the number one natural disaster. The U.S. Congress established the National Flood Insurance Program in 1968. The program is established through FEMA and covers flood protection for homeowners.

Interesting Facts:

• Flood insurance may be required in some areas.
• This type of insurance covers direct loss from a flood.
• Flood insurance excludes floods caused by earth movement, like earthquakes, so earthquake coverage must be added.

 

In Conclusion

 

To keep your family, home, and livelihood protected from a natural disaster in California and in some of the other states mentioned above, you need to be prepared.  Build out your emergency preparedness plan and kit, so when the next earthquake or flood hits, you’re ready to go.  It’s not a matter of “if”, it’s a matter of “when”!

Next, always be prepared for the worst.  Have your home maintained for an earthquake.  Ensure all electrical, gas, plumbing, and foundational issues are fixed.

Last, don’t wait until it’s too late, buy proper insurance and make sure if you do have coverage in place you are not passively renewing your policy.  Have a specialist review your policy at least once a year to ensure you avoid any surprises after its too late.  In California and many other states, earthquake and flood insurance are a must especially now as we are seeing a drastic rise in natural disasters and experts project this will continue.  Protect your rental properties and assets by contacting your insurance broker and ask about on earthquake and flood insurance coverage.

Call your apartment insurance experts today at 650-282-3104 *1 or email us at hello@gsisol.com.

GSI is a full service insurance and risk management brokerage that specializes in the Apartment and Property Management Industry.   Visit us at:  www.gsisol.com

In my ten years as a landlord, I never expected the dreaded pink letter indicating I was being sued by a tenant.

Yet, there it was – right in my mailbox – a letter from my former tenants indicating they were suing us for withholding their security deposit. There are strict tenant rights laws around security deposits. Each state, and sometimes city, has different laws around security deposits. Was I in breach of my state’s laws regarding security deposits?

You’ll have to wait until the end to find out.

Tenants sue landlords for many reasons, but some prove more popular than others. Does your insurance policy cover any of the top five reasons tenants sue?

1) Wrongful eviction

There are several steps to a proper eviction. If a landlord skips any of the steps, this is considered a wrongful eviction and is in violation of the law.

To properly evict a tenant, landlords need to follow their state law. Oftentimes, this includes five steps:

Step One: Serve the tenant with appropriate notice based on your state’s laws.

Step Two: File an eviction action with the court, and serve the tenant with the complaint and summons.

Step Three: Provide appropriate time to allow the tenant to respond to the complaint.

Step Four: Receive a judgment on the eviction.

Step Five: Remove the tenant (legally). Local law enforcement can assist with this process.

Landlords are at risk of being sued for wrongful eviction if any of these steps are skipped during the eviction process. Additionally, retaliation eviction is illegal. This occurs when a landlord tries to evict a tenant in retaliation for filing a complaint against them with a government agency. Changing the locks, shutting off utilities, and removing the tenant’s property are all forms of wrongful eviction.

2) Breach of quiet enjoyment

There are two rights that all tenants get that does not need to be specified in a lease: habitability and quiet enjoyment. First, we will discuss quiet enjoyment. Quiet enjoyment means that a landlord cannot interfere with a tenant’s ability to live reasonably in their rented home.

Landlords who come to the rental without notice, interrupt utilities, or have safety or security violations are in breach of this right. A rental owner is allowed to enter their own property, of course, but with proper notice. In my town, it was 48 hours notice, but it is different in each location, so be sure to understand the rights owed to your tenants.

If a tenant feels their right to quiet enjoyment is in breach, they can sue. Examples of reasons tenants sue for breach of quiet enjoyment are landlord harassment, ongoing renovations or construction, or unattended repairs that adversely affect the tenant’s life.

3) Habitability

A tenant deserves a habitable home to live in. When a property owner is in violation of a habitable residence, a lawsuit can be filed by the renter. Legally, this is called “the implied warranty of habitability.” Each state, city, or county has local building codes that must be complied with. Items that are always required are smoke detectors, hot water, heat, and sewage disposal.

Check local laws to fully understand what is expected of you as a rental owner. Many cities require inspections to ensure that the space is habitable and suitable for tenants.

4) Fair housing discrimination

It is illegal to discriminate against a prospective tenant based on sex, race, and other protected categories. A landlord cannot advertise in a way that discriminates, such as saying they are seeking a female tenant. Additional ways that landlords discriminate are inconsistent application requirements, asking larger deposits for certain groups of people, or terminating an agreement based on discriminatory reasons.

Tenants and applicants who feel they have been discriminated against can file a complaint with the Department of Housing and Urban Development.

5) Withholding or mishandling security deposit

Last, withholding a security deposit is often a cause for a lawsuit (like mine). Landlords can withhold security deposit funds for unpaid rent, damage, making repairs, or cleaning. However, “normal wear and tear” cannot be withheld from the security deposit. This is where it gets dicey. What constitutes normal wear and tear is not well-defined. So, while a landlord might feel that damage was excessive, a tenant can claim it was normal wear and tear. This is the reason I was sued.

Was dog nails gouged into wood normal wear and tear? Was grease splatter on the walls normal wear and tear?

Ultimately, the judge decided no in my lawsuit. It was not normal wear and tear and I won the judgment.

Can insurance cover landlords in the event they get sued?

Not every insurance policy covers the same things so it’s extremely important landlords, property owners and property managers have an insurance broker that specializes in the real estate industry to ensure you are properly covered.  Landlord insurance policies typically do not cover tenant discrimination without a separate endorsement and/or a separate policy all together.  Habitability and fair housing is also something that may be excluded on your insurance policies and may not provide the coverage you think you have to protect you in the event you get sued by a tenant or third party.

Specifically, a standard landlord business owners policy covers three types of lawsuits:

1. Tenant injury caused by negligence: Landlord insurance can cover costs associated with lawsuits over an injury. Icy parking lot slips, broken stair falls, and other accidental injuries are covered by insurance. The policy will cover legal costs and judgments up to your policy limit.
2. Damage to the tenant’s property: Let’s say a wiring defect causes a fire or a pipe breaks and the unit floods – landlord insurance will cover it. Any injuries or property damage will be covered by the insurance policy.
3. Personal injury liability: Certain policies cover personal injury liability. This can cover libel, slander, invasion of privacy, wrongful eviction, and discrimination. However, many policies do not cover these lawsuits. Understand your policy fully before falsely believing you’re covered for something you might not be.

 

In Conclusion  

Certain risks come with owning a rental property. Lawsuits are a very real possibility in this litigation-rich climate. Ensure that you are prepared for a lawsuit with the right insurance policy. Review your insurance policies and pay attention to what is and what is not covered. The right policy will keep you protected from certain litigations.

GS Insurance specializes in real estate insurance. You can learn more about insurance that protects, landlords, property managers, and building owners here.

GS Insurance Solutions, Inc is a full-service insurance and risk management brokerage specializing in the apartment and property management industry.  For more information on the full area of products and services we offer tailored to your specific needs, please call our team at (650) 282-3104 or email us at hello@gsisol.com